Calcutta, Oct. 3: The power ministry has set a rider on assistance to state electricity boards (SEBs) under accelerated power development reform programme (APDRP).

A portion of the funds will be provided as incentive, based on reduction of the gap between unit cost of supply and revenue realisation (calculated based on the number of units purchased) by SEBs. The move is based on the recommendations of the Deepak Parekh committee.

“That is a big challenge for state electricity boards,” West Bengal State Electricity Board chairman G. D. Gautama said. “The success of power reforms lies in the reduction of aggregate technical and commercial losses (ATC) within a short span of time,” he added.

Close to Rs 3,500 crore has been allocated under APDRP for the current financial year. “There would be two streams of support under the APDRP — one for investment and the other an incentive, based on reduction of the gap between unit cost of supply and revenue realisation,” sources in the power ministry said.

The investment stream is designed to support development of demonstration projects, which will enable the utility to focus on resources and build a model on which a reform strategy can be tested.

The ministry has recommended that 50 per cent of APDRP funds — close to Rs 1,750 crore — be handed under the investment scheme. It has also been decided that while the Central government should provide 50 per cent of the funds required for a project, the other half should be garnered by the electricity board concerned.

Unlike the investment module, the incentive stream is designed to reward states that are willing to go beyond demonstration projects and undertake enterprise-wide reform to improve performance. Since the reward is based on actual showing, which will be demonstrated in the future, the disbursements from this incentive stream will be made over a period of time.

Power ministry sources said the remaining assistance of Rs 1,750 crore from APDRP should be disbursed as a one-for-one matching grant based on reduction of the gap between the unit cost of supply and revenue. This decline must occur in an enterprise — defined as a corporate body or an electricity board or a department.

“For instance, if there is an improvement in one part of the utility and a deterioration in another part, it will disqualify the board or utility for incentive support. However, in a state where distribution is undertaken by different corporate entities, the incentives will have to be calculated separately,” they added.